Shares in US semiconductor giant Broadcom Inc. climbed in late trading on Wednesday as investors cheered for the company’s better-than-expected quarterly earnings results and annual revenue outlook, while a planned stock split added to the optimism.
The stock of the Palo Alto, California-based chip and software maker gained 14.57% to $1,713.37 in after-market, having closed 2.36% higher at $1,495.51.
The surge came after the firm recorded revenue of $12.49 billion for the fiscal second quarter, marking a 43% year-over-year (YoY) increase from the $8.73 billion logged in the same quarter of 2023. The figures were also above analysts’ expectations of $12.04 billion.
On the other hand, net income in the period ending April 30 ended at $2.12 billion or $4.42 per share, compared with the profit of $3.48 billion or $8.15 per share posted in the same quarter the year prior.
Broadcom Raises 2024 Revenue Outlook, Plans Stock Split
Broadcom chief executive Hock Tan contributed the strong revenue results to the solid demand for artificial intelligence (AI) and VMware.
The company has benefitted significantly from the AI boom due to its advanced networking chips that aid in AI data work and are used by large language models (LLMs) such as OpenAI Inc.’s ChatGPT.
For the second quarter, the chipmaker’s revenue from AI products stood at $3.10 billion. Revenue from its semiconductor solutions business, which comprises its networking and custom chips, was up 6% to $7.20 billion, while infrastructure revenue for the period was $5.29 billion.
The firm’s custom chips segment has obtained orders from major cloud companies seeking a cheaper alternative to the high-priced processors built by AI chip giant Nvidia Corp. It is speculated mainly that Broadcom is producing custom chips for Alphabet Inc.’s Google LLC and Meta Platforms Inc.
The company now expects its full-year revenue to be $51.00 billion, $1 billion higher than analysts’ forecasts of $50.58 billion and its previous projection. It estimates 2024 AI chip revenue at $11 billion, compared with its earlier view of $10 billion.
Providing some optimism to retail investors, the firm announced its plans for a 10-for-1 forward stock split in a bid to capitalize on a sharp rise in its shares this year.
The stock has rallied over 30% so far in 2024, following a nearly twofold increase in the year prior.
Stockholders logged after the market closes on July 11 are expected to receive nine more shares for every share they have after the market’s close on July 12. The split-adjusted trading is due to start on July 15.
